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GASB unveils new rules for reporting on retiree benefits

GASB on Tuesday took another big step in its efforts to provide
accounting and financial reporting guidance that more accurately
portrays the liabilities that state and local governments face in
funding retiree benefits.

GASB approved three new standards—two that
address post-employment benefits other than pensions (OPEB), primarily
retiree health insurance, and one that establishes requirements for
pensions and pension plans beyond the scope of guidance GASB issued in 2012.

The two new OPEB standards are as follows:

GASB Statement No. 74, Financial Reporting for
Postemployment Benefit Plans Other Than Pension Plans, which
establishes rules on reporting by OPEB plans that administer
benefits on behalf of governments.

GASB Statement No. 75,
Accounting and Financial Reporting for Postemployment Benefits
Other Than Pensions, which outlines reporting by governments
that provide OPEB to their employees and for governments that
finance OPEB for employees of other governments.

The new OPEB standards are designed to bring greater clarity to
post-employment benefit liabilities, the most significant of which is
retiree health insurance. The new standards parallel the pension
standards issued in 2012: GASB Statement No. 67, Financial
Reporting for Pension Plans, and GASB Statement No. 68,
Accounting and Financial Reporting for Pensions (see “GASB
Pension Changes: Are You Ready?”).

Together, the OPEB and pension standards provide accounting and
reporting rules that give state and local governments, their
employees, and constituencies a more accurate picture of the true cost
of pensions and other post-employment benefits promised to retirees.
Previous guidance took a funding approach to accounting that did not
reflect the extent of the future cost for post-employment benefits.

“These OPEB standards usher in the same fundamental improvements in
accounting and financial reporting that were previously introduced for
pensions,” GASB Chairman David Vaudt said in a news release. “Because
OPEB promises represent a very significant liability for many state
and local governments, it is critical that taxpayers, policymakers,
bond analysts, and others are equipped with enhanced information,
which will enable them to better assess the related financial
obligations and annual costs of providing OPEB.”

The third statement approved Tuesday, GASB Statement No. 73,
Accounting and Financial Reporting for Pensions and Related
Assets That Are Not Within the Scope of GASB Statement 68, and
Amendments to Certain Provisions of GASB Statements 67 and 68,
sets rules for pensions not covered by Statements No. 67 and No. 68.

Effective dates

The provisions in Statement No. 73 are effective for fiscal years
beginning after June 15, 2015—except those provisions that address
employers and governmental nonemployer contributing entities for
pensions that are not within the scope of Statement No. 68, which are
effective for financial statements for fiscal years beginning after
June 15, 2016.

The provisions in Statement No. 74 are effective for financial
statements for periods beginning after June 15, 2016.

The provisions in Statement No. 75 are effective for fiscal years
beginning after June 15, 2017. GASB encourages earlier application of
all three new standards.

Statement availability

GASB said that Statements No. 73, No. 74, and No. 75 would be
available for free download from the
GASB website in late June.

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